Over 70% of economists think the United States will go into a recession by the end of 2021. Since less than 20% of Americans are able to live off of their savings for six months or more, it’s crucial to recession-proof our savings as much as possible. Here are 4 tips to get started:
1. Protect Your Savings
Make sure to protect your savings by making sure your money is federally insured by the FDIC (or in the case of a credit union, the NCUA) to avoid losses when a bank fails. Over 400 banks failed or went bankrupt between the years of 2007-2011 during the Great Recession. If your funds aren’t FDIC insured when an institution fails, it could take years to get your funds reimbursed, if at all.
2. Build Savings
Build savings as much as possible now. Reduce expenses in the budget or increase income with a side hustle before a recession hits. This will leave you with as much of an emergency savings fund as you can manage. During a recession, hours are cut, temps can’t find placement, and some jobs disappear altogether. The best way to prepare for a recession is not to take your income for granted.
3. Say "No" to New Debt
Don’t take on new debts and pay your debts down. During a recession we tend to feel the effects of inflation the most. Giving yourself more wiggle room in the budget will help to protect your savings by decreasing the likelihood of needed to dip into it. That same wiggle room can help you to save more and your savings will carry you further in a worst-case scenario. Pay down your credit cards and think twice before you take out a car loan or obtain a mortgage.
4. Evaluate Insurance Policies
Have adequate insurance to minimize your out of pocket costs in any life event. You will want to evaluate your policies to make sure you know what is covered and what your deductible is. Having a higher deductible can reduce your monthly payment, but it could cost you if you needed to file a claim.
If you need lifestyle suggestions that’ll help decrease expenses and increase income with a custom action plan that’ll put on the roadmap to recession proofing your finances, check-out our free budget review.